The large manufacturers index improved to -8 from -12 in the previous report. However, this was a bit short of the -7 expected.
The non-manufacturers index improved to 6 from 4 last quarter. This too fell short of expectations.
The outlook reports for both sectors were also disappointing.
This report reflects sentiment among Japan's largest companies. A positive number reflects optimism.
Japan's economy has been struggling to grow. The country's new prime minister and incoming central bank governor have committed to stimulate the economy through ultra-easy monetary policy.
These strong words have caused volatility in the Japanese yen.